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Federal Communications Commission FCC 16-21
Before the
Federal Communications Commission
Washington, DC 20554
In the Matter of
Telseven, LLC, Calling 10, LLC, Patrick Hines
a/k/a P. Brian Hines
)
)
)
)
)
)
File No.: EB-TCD-12-00000416
NAL/Acct. No.: 20133217005
FRNs: 0009834466, 0018070938,
0016963712, 0021816459
FORFEITURE ORDER
Adopted: February 18, 2016 Released: February 18, 2016
By the Commission: Commissioner O’Rielly concurring in part and dissenting in part.
I. INTRODUCTION
1. The inclusion of unauthorized charges on consumers’ telephone bills is an “unjust and
unreasonable” practice under Section 201(b) of the Communications Act of 1934, as amended (Act). In a
Notice of Apparent Liability (NAL), the Commission detailed apparent violations by Telseven, LLC and
Calling 10, LLC (collectively, Calling 10 or Company), and Patrick Hines (Hines) for “cramming”
charges for their service on consumers’ local telephone bills and for deceptively marketing their
“Enhanced Number Assistance and Directory Assistance” (ENADA) service.1 After opportunity for
further submissions by the parties, we impose a penalty of $1,680,000, jointly and severally, against
Calling 10 and Hines.
2. During a several year period, Calling 10, at the direction of Hines and through its
affiliates, amassed approximately one million toll-free numbers for no apparent purpose other than to
increase the likelihood that consumers would dial one of these numbers and reach Calling 10 by mistake.
When consumers did so, Calling 10 misled them about the nature and cost of its service and then charged
consumers approximately seven dollars for a directory assistance service that they did not authorize or
use. Calling 10 used these practices to illegally place charges for its unauthorized service on the
telephone bills of thousands of consumers. Although Calling 10 failed to respond to the NAL, Hines, sole
owner, officer, and director of Calling 10, filed a response contending that he should not be held
personally liable.2 On the basis of Hines’ response, we find no reason to cancel, withdraw, or reduce the
proposed penalty, or not to hold Hines personally liable for the violations addressed in the NAL.
1 See Telseven, LLC and Patrick B. Hines, Notice of Apparent Liability for Forfeiture, 27 FCC Rcd 15558 (2012)
(NAL).
2 See Letter from Christopher J. Greene, Counsel to Patrick Hines, Purcell, Flanagan, Hay and Greene, to Kimberly
A. Wild, Assistant Chief, Telecommunications Consumers Division, FCC Enforcement Bureau (Jan. 23, 2013)
(NAL Response).
Federal Communications Commission FCC 16-21
2
II. BACKGROUND
3. In response to numerous consumer complaints about Calling 10’s3 unauthorized directory
assistance charges on consumers’ local telephone bills, the Bureau initiated an investigation,4 reviewed
more than 80 complaints, and interviewed dozens of consumers. The relevant facts upon which the NAL
was based are not disputed by Hines.5 We affirm the findings and conclusions in the NAL that Calling 10
and Hines violated Section 201(b) of the Act,6 and that Hines is jointly and severally liable for the
$1,680,000 forfeiture proposed in the NAL.7 As the Commission discussed in the NAL, consumers who
inadvertently reached Calling 10 by dialing one of its million toll-free numbers heard the following
recorded message:
For a charge of 4.99, please have a pen ready to write down our phone number. You can hang up
and dial 10 15 15 8000. That number again is 10 15 15 8000. The number you have dialed has a
new directory assistance service. Please dial 10 15 15 8000 for more information on the number
you have dialed and be connected to a new national directory assistance service. Brought to you
by Calling 10. Rates exclude universal service fee and administrative recovery fee. The charge
on your phone bill will appear as a call to directory assistance to Nevada. You can also dial 10 15
15 8000 702 555 1212. Subject to terms and conditions of service available at
www.Calling10.com. For trouble reporting, you can email service@Calling10.com.8
4. Many of Calling 10’s one million toll-free numbers were substantially similar to existing
working numbers or were numbers formerly used by well-known entities.9 Therefore, and as described in
3 Telseven, LLC, asserts that it has operated under the trade name Calling 10, and refers to Telseven, LLC, and
Calling 10, LLC, collectively as “Calling 10.” See Letter from Steven A. Augustino, Counsel to Telseven, to
Richard A. Hindman, Chief, Telecommunications Consumers Division, FCC Enforcement Bureau at 1, 7 (Dec. 5,
2011) (on file in EB-TCD-12-00000416). We refer to the collective enterprise as Calling 10 but use the names
“Calling 10, LLC” and “Telseven, LLC” when necessary. Calling 10 did not respond to the NAL.
4 Previously, the Commission also took enforcement action against Telseven, LLC, and Hines for, among other
things, failing to contribute fully to the Universal Service Fund, failing to contribute fully to the administration of
the North American Numbering Plan and the administration of local number portability, and for failing to pay
regulatory fees when due. See Telseven, LLC, Notice of Apparent Liability for Forfeiture, 27 FCC Rcd 6636 (2012).
Telseven, LLC, Calling 10, LLC, and Hines were also investigated by the California Public Utilities Commission
(California PUC). See Decision Different to Modified Presiding Officer’s Decision Finding that Corporate
Respondents and Patrick Hines Placed Unauthorized Charges on California Telephone Bills and Closing
Proceeding, Investigation 10-12-010, Decision 14-08-033, California PUC (Aug. 14, 2014) (California PUC Order),
available at http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M101/K922/101922573.PDF, reh’g denied,
Order Denying Rehearing of Decision (D.) 14-08-033, Decision 15-02-040 (Mar. 2, 2015), available at
http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M146/K995/146995070.PDF (California PUC Order
Denying Rehearing) (concluding that the charges placed on consumers’ bills by Telseven, LLC, Calling 10, LLC,
and Patrick Hines were not authorized and ordering reparations and a fine of $19,760,000, jointly and severally),
petition for review denied, Hines v. Public Utilities Commission, case no. A144652 (Sept. 1, 2015).
5 A more complete summary of the facts can be found in the NAL.
6 47 U.S.C. § 201(b).
7 As we explained in the NAL and below, we treat Hines and the common carrier corporate entity he controlled as
the same entity for purposes of finding that he violated Section 201(b) in his personal capacity as a holder of a
Section 214 authorization issued by the Commission. See NAL, 27 FCC Rcd at 15571–73, paras. 26–31 (finding
that Hines was the sole owner, employee, officer, and director, had complete control of Calling 10, organized and
dismantled businesses as necessary to avoid liability, and participated directly in the activities described in the NAL).
8 NAL, 27 FCC Rcd at 15561, para. 4.
9 Id. at 15559, para. 1.
Federal Communications Commission FCC 16-21
3
more detail in the NAL, consumers were confused by the recording because they never intended to reach
Calling 10 and did not understand the nature of the Company’s offered service.10 Calling 10 did not
engage in any advertising; consumers therefore reached Calling 10 only by mistake.11 The Company did
not offer evidence that any consumer actually used its service to obtain directory assistance.12 In addition,
many complainants who mistakenly reached Calling 10 reported that the Company charged them even
though they never called 10 15 15 8000, and all of the complainants stated that they had not authorized
the Calling 10 charges on their telephone bills.13
5. The Commission concluded that Calling 10’s message was misleading and deceptive for
several other reasons, including:
· The message failed to disclose that Calling 10 would bill consumers for dialing the dial-
around14 number, without regard to whether the Company provided any actual directory
assistance service to them. In fact, Calling 10 routinely billed consumers who hung up
the phone without seeking its directory assistance service, if they dialed the 10 15 15
8000 number. As a result, Calling 10 charged complainants without providing any
directory assistance service to them at all.15
· The message did not inform consumers that the number they had been trying to reach was
no longer in service, except for purposes of driving traffic to Calling 10’s ENADA
service; instead, the Company’s message implied that that the Calling 10 service was
associated with the party the caller was trying to reach.16
· The message did not clearly and conspicuously disclose the actual fee for the Calling 10
service; the message mentioned $4.99, but Calling 10 actually charged consumers over
$7.00.17
6. The NAL concluded that Calling 10 and Hines apparently violated Section 201(b) of the
Act by cramming charges on consumers’ telephone bills and engaging in the unjust and unreasonable
practice of deceptively marketing the ENADA service.18 The NAL found that Calling 10 and Hines
apparently controlled almost one million toll-free numbers solely to catch consumers who dialed those
10 Id. at 15567, para. 5.
11 Id.
12 Id at 15567–69, paras. 17–22.
13 Id. at 15564–67, paras. 12–15.
14 “Dial-around” or “direct access” numbers, such as Calling 10’s 10 15 15 8000, allow a telephone subscriber to
bypass (i.e., dial around) the subscriber’s presubscribed long distance telephone carrier, if any, and instead use (i.e.,
directly access) the dial-around carrier’s service for a particular telephone call. Any toll charges for such calls are
assessed by the dial-around carrier or its agent, and not the consumer’s presubscribed long distance carrier. The
Calling 10 recording only provides a dial-around number for the directory assistance platform, not a number a
consumer could dial using his or her own presubscribed long distance carrier (or cell phone). The charges assessed
by Calling 10 may be, in whole or in part, the toll charges for the alleged dial-around calls to its directory assistance
platform in Nevada.
15 NAL, 27 FCC Rcd at 15565–67, paras. 13–16; see also, e.g., Long Distance Direct, Inc., Memorandum Opinion
and Order, 15 FCC Rcd 3297, 3302, para. 14 (2000) (LDDI MO&O) (finding that “membership” and other fees
relating to a psychic hotline were not authorized and the consumers had never spoken to anyone at the psychic
hotline; such charges were, therefore, unjust and unreasonable and prohibited by Section 201(b) of the Act).
16 NAL, 27 FCC Rcd at 15568, para. 20.
17 Id. at 15569, para. 21.
18 Id. at 15569, para. 22.
Federal Communications Commission FCC 16-21
4
numbers, the recorded message was misleading and implied that the dial-around number was associated
with the number the caller was trying to reach, and callers were charged over $7.00 just by dialing the
number even though they did not receive directory assistance.19 The NAL proposed a $1,680,000
forfeiture and concluded that Hines was jointly and severally liable for the proposed forfeiture.20
7. On April 19, 2011, Hines sold certain Calling 10 assets to another company, Assist 123,
LLC,21 which itself has been the subject of Commission enforcement action.22 On April 20, 2012, before
the NAL was released, Telseven, LLC, and Calling 10, LLC, filed for Chapter 7 bankruptcy in the United
States Bankruptcy Court for the Middle District of Florida, Jacksonville Division.23
8. Thereafter, on January 23, 2013, Hines filed a timely response, on behalf of himself
individually, to the NAL.24 In his response, Hines does not discuss the Section 201(b) violations, but
contends that the Commission should rescind the proposed forfeiture against him because it did not
correctly apply the “piercing the corporate veil” test and that Florida law should apply to this case.
Calling 10 did not file a response to the NAL.
III. DISCUSSION
9. The Commission proposed a forfeiture in this case in accordance with Section 503(b) of
the Act,25 Section 1.80 of the Commission’s rules,26 and the Commission’s Forfeiture Policy Statement.27
When we assess forfeitures, Section 503(b)(2)(E) requires that we take into account the “nature,
circumstances, extent, and gravity of the violation and, with respect to the violator, the degree of
culpability, any history of prior offenses, ability to pay, and such other matters as justice may require.”28
As discussed below, we have fully considered Hines’ response to the NAL, but we do not find his
arguments persuasive. We therefore affirm the findings and conclusions in the NAL that Calling 10 and
Hines violated Section 201(b) of the Act,29 and that Hines is jointly and severally liable for the $1,680,000
forfeiture proposed in the NAL.30
19 Id. at 15569, paras. 21–22.
20 Id. at 15571–73, paras. 26–31.
21 See Letter from Douglas Orvis II, Attorney for Assist 123, Morgan, Lewis, and Bockius, LLP, to Kimberly A.
Wild, Assistant Chief, Telecommunications Consumers Division, FCC Enforcement Bureau (July 11, 2012) (on file
in EB-TCD-12-00005541).
22 Assist 123, LLC, Order and Consent Decree, 29 FCC Rcd 8248 (2014).
23 Notification from Jason B. Burnett and Paige A. Wagner, Counsel for Calling 10, GrayRobinson, P.A., Notice of
Filing Chapter 7 Bankruptcy, U.S. Bankr. Ct., Mid. Dist. Fla., Jacksonville Div., Case No.: 3:11-bk-2682-PMG
(Apr. 23, 2012) (on file in EB-TCD-12-00000416) (stating that on April 20, 2012, Telseven, LLC, and Calling 10,
LLC, had filed for Chapter 7 bankruptcy). That proceeding remains active.
24 See NAL Response. Hines received an extension of time in which to file the NAL Response.
25 47 U.S.C. § 503(b).
26 47 CFR § 1.80.
27 The Commission’s Forfeiture Policy Statement and Amendment of Section 1.80 of the Rules to Incorporate the
Forfeiture Guidelines, Report and Order, 12 FCC Rcd 17087 (1997) (Forfeiture Policy Statement), recons. denied,
Memorandum Opinion and Order, 15 FCC Rcd 303 (1999).
28 47 U.S.C. § 503(b)(2)(E).
29 47 U.S.C. § 201(b).
30 As we explained in the NAL and below, we treat Patrick Hines and the common carrier corporate entity he
controlled as the same entity for purposes of finding that Patrick Hines violated Section 201(b) in his personal
capacity as a holder of a Section 214 authorization issued by the Commission. See NAL, 27 FCC Rcd at 15571–73,
paras. 26–31.
Federal Communications Commission FCC 16-21
5
10. Hines does not dispute the facts that support the Section 201(b) violations discussed in
the NAL. Rather, he argues that the Commission should not hold him personally liable because the test
articulated by the Commission “does not form the basis for determining whether an individual owner of a
corporate entity is separately liable for a forfeiture of that entity under the Communications Act of 1934,
as amended.”31 Specifically, Hines argues that the cases cited in the NAL in support of “piercing the
corporate veil” and imposing liability directly on him do not support the Commission’s conclusion
because they do not involve forfeiture orders.32 Hines also attempts to distinguish between cases that
involve two corporations and those in which the veil-piercing test is applied to the relationship between
an individual and a corporation, as is the case here.33 The cases nevertheless demonstrate, as we
discussed in the NAL, that the Commission may hold one entity or individual liable for the acts or
omissions of a different, related entity, even when the strict standards of common law alter ego would not
apply.34 In addition, the general principle behind piercing the corporate veil in APCC Services—that
separate corporate structures can be ignored where the purpose of a statutory scheme or regulation would
otherwise be frustrated—holds true under the facts here.35
11. We also affirm our finding in the NAL that Calling 10 and Hines are jointly and severally
liable. As explained in the NAL, it is well established that we may hold one entity or individual liable for
the acts or omissions of a different, related entity: (i) where there is a common identity of officers,
directors, or shareholders; (ii) where there is common control between the entities; and (iii) when it is
necessary to preserve the integrity of the Communications Act and to prevent the entities from defeating
the purpose of statutory provisions.36 As the U.S. Court of Appeals for the D.C. Circuit held in Capital
Telephone, “a corporation will be looked upon as a legal entity as a general rule, and until sufficient
reason to the contrary appears; but, when the notion of legal entity is used to defeat public convenience,
31 NAL Response at 1.
32 Id. at 2.
33 Id.
34 See NAL, 27 FCC Rcd at 15571–73, paras. 26–31.
35 APCC Servs., Memorandum Opinion and Order, 22 FCC Rcd 4286, 4307, para. 47 (2007).
36 See NAL, 27 FCC Rcd at 15571, para. 27. The Commission and the courts have long stated that “[w]here the
statutory purpose could . . . be easily frustrated through the use of separate . . . entities, the Commission is entitled to
look through corporate form and treat the separate entities as one and the same for purpose of regulation.”
Improving Public Safety Communications in the 800 MHz Band, Fifth Report and Order, Eleventh Report and Order,
Sixth Report and Order, and Declaratory Ruling, 25 FCC Rcd 13874, 13887–88 (2010) (citing Gen. Tel. Co. of the
S.W. v. United States, 449 F.2d 846, 854 (5th Cir. 1971)); see also Capital Tel. Co., Inc. v. FCC, 498 F.2d 734, 739
(D.C. Cir. 1974) (Capital Telephone) (finding that the FCC correctly treated the individual and the corporation he
controlled as the same entity and granted only one license and that “substantial evidence supports the Commission’s
decision to pierce Capital’s corporate veil in order to carry out the statutory mandate ‘to provide a fair, efficient, and
equitable distribution of radio service.’”). The courts have also looked through the corporate form in analogous
situations, such as those of the parent and subsidiaries in Transcontinental Gas Pipe Line Corp. v. FERC, 998 F.2d
1313, 1321-22 (5th Cir. 1993) (finding that FERC correctly looked behind corporate forms and treated the parent
and subsidiaries as a single entity where the parent pipeline set up subsidiaries to sell gas at prices at which the
parent could not legally sell), two corporations that were controlled by one family in Mansfield Journal Co. (FM) v.
FCC, 180 F.2d 28, 37 (D.C. Cir. 1950) (concluding that although two newspapers were separate corporations, with
separate editorial staffs, and located in communities over fifty miles apart, the FCC correctly denied applications of
both corporations when the record showed that one family owned all of the stock in both corporations, the owners
took active part in the control and policy formulation of the newspapers, and the true applicant in each case was the
same group of individuals), and several corporations used to operate one business in Schenley Distillers Corp. v.
United States, 326 U.S. 432, 437 (1946) (“The fact that several corporations are used in carrying on the business
does not relieve them of their several statutory obligations more than it relieves them of the taxes severally laid upon
them.”).
Federal Communications Commission FCC 16-21
6
justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of
persons.”37
12. As in Capital Telephone, it is necessary to look beyond the corporate name and take
“cognizance of the identity of ownership and control” between Calling 10 and Hines in order to
implement core statutory directives and our implementing rules.38 As we discuss below, we affirm the
conclusion in the NAL that all three of these factors were met in this case.
13. With respect to the first two factors—common identity and common control—the
evidence demonstrates that Hines had complete control of Calling 10; was the sole, direct, or indirect
owner of Calling 10, and the only officer and director of the Company;39 and repeatedly organized and
dismantled related or affiliated businesses.40 Hines used the Calling 10 address as his address.41 Hines
executed and signed all transactional documents on behalf of Telseven, LLC, and Calling 10, LLC,
including Telseven, LLC’s, Articles of Organization42 and its billing and collection contracts.43 He also
signed all declarations attesting to the truth and accuracy of his companies’ responses to the
Commission.44 Hines admits that he was the “managing member” and “only member” of Calling 10; that,
other than himself, there were no employees working for Telseven, LLC, or Calling 10, LLC; and that the
Company otherwise only had a single consultant in Nevada and a single consultant in California.45 Hines
does not name any person in his NAL Response, other than himself, who would have been responsible for
the unauthorized charges on consumers’ telephone bills for the “directory assistance” service.46
14. The third criterion for holding an entity or person responsible for the acts of another—the
need to preserve the integrity of the Act and to prevent the defeat of the purpose of the statutory
provisions at issue—is also clearly satisfied here. Section 201(b) of the Act states, in pertinent part, that
“[a]ll charges, practices, classifications, and regulations for and in connection with [interstate or foreign]
communication service [by wire or radio], shall be just and reasonable, and any such charge, practice,
classification, or regulation that is unjust or unreasonable is declared to be unlawful.”47 The inclusion of
unauthorized charges and fees on consumers’ telephone bills is an “unjust and unreasonable” practice
under Section 201(b);48 additionally, unfair and deceptive marketing practices by interstate common
37 Capital Telephone, 498 F.2d at 738.
38 Id.
39 NAL, 27 FCC Rcd at 15572, para. 29.
40 Id. at 15571, para. 26.
41 Hines stated in his deposition that his “current address” was 200 Executive Way, Ponte Vedra Beach, Florida.
See In re Telseven, LLC, Case No. 3:12-bk-02682-PMG (Bankr. M.D. Fl.), Transcript of Examination of Witness
Patrick Brian Hines (Aug. 6, 2012) (Hines Deposition). The same address is listed for Telseven, LLC, on the FCC
Form 499-A (filed Apr. 1, 2011), and was also provided for Hines, as President of Telseven, LLC, in the FCC
Registration System (CORES) (filed Nov. 6, 2003).
42 NAL, 27 FCC Rcd at 15572, para. 29. We also note that Calling 10 was undercapitalized, with only $1000. See
California PUC Order at 38 & n.84.
43 NAL, 27 FCC Rcd at 15572, para. 29.
44 Id.
45 See Hines Deposition at 12–13, 23–24, 37.
46 Similarly, the California PUC found that Hines failed to “identify any business associate, partner, or shareholder
other than himself who might have been responsible for the corporate respondents’ unauthorized charges or the
scheme which resulted in them.” California PUC Order Denying Rehearing at 6.
47 47 U.S.C. § 201(b).
48 See, e.g., LDDI MO&O, 15 FCC Rcd at 3302, para. 14; see also Cheap2Dial Tel., LLC, Notice of Apparent
Liability for Forfeiture, 26 FCC Rcd 8863 (2011) (finding that the placement of unauthorized monthly charges for
(continued….)
Federal Communications Commission FCC 16-21
7
carriers constitute unjust and unreasonable practices under Section 201(b).49 Failure to hold Hines
responsible for Calling 10’s Section 201(b) violations would eviscerate the prohibition of Section 201(b)
as applied to Calling 10, because he and the Company are one and the same, he has attempted to render
Calling 10 judgment proof by creating a web of interrelated companies all of which he controlled, and he
then caused Calling 10 to file for bankruptcy.
15. As we discussed above and in the NAL, Hines was ultimately the sole owner and officer
of Calling 10 (and all the related companies he created) and controlled every aspect of the Calling 10
operation.50 He directly participated in the deceptive marketing and cramming activities discussed in the
NAL. He ran the entire scheme where his Responsible Organizations (RespOrgs51) obtained close to one
million toll-free numbers that consumers could inadvertently or mistakenly dial.52 He created the
misleading and deceptive recording for his so-called directory assistance service. He charged consumers
without their authorization for “directory assistance” (when no directory assistance was requested or
provided), resulting in a large volume of consumer complaints and subsequent investigations.53
16. Hines established numerous corporations to carry out this fraudulent operation and used
Calling 10 as a conduit for his personal interests. Telseven, LLC, and Calling 10, LLC, are both
controlled and owned by the Patrick Hines Revocable Trust.54 Calling 10, LLC’s, Operating Agreement
(Continued from previous page)
dial-around long distance service on consumers’ local telephone bills violates Section 201(b)); Main St. Tel. Co.,
Notice of Apparent Liability for Forfeiture, 26 FCC Rcd 8853 (2011) (same); Norristown Tel. Co., LLC, Notice of
Apparent Liability for Forfeiture, 26 FCC Rcd 8844 (2011) (same); VoiceNet Tel., LLC, Notice of Apparent
Liability for Forfeiture, 26 FCC Rcd 8874 (2011) (same).
49 See, e.g., STi Telecom Inc. (formerly Epana Networks, Inc.), Notice of Apparent Liability for Forfeiture, 26 FCC
Rcd 12808, 12810, para. 6 (2011) (finding that the marketing materials used to sell prepaid calling cards were
misleading and deceptive regarding the rates and charges applicable to the service and therefore violated Section
201(b)), Forfeiture Order, 30 FCC Rcd 11742, 11744-45, paras. 7-10 (2015); NobelTel, LLC, Notice of Apparent
Liability for Forfeiture, 27 FCC Rcd 11760, 11762–63, para. 6 (2012) (same), Forfeiture Order, 30 FCC Rcd 11779,
11780-81, paras. 4-5 (2015); Locus Telecomms., Inc., Notice of Apparent Liability for Forfeiture, 26 FCC Rcd
12818, 12820–21, para. 7 (2011) (same), Forfeiture Order, 30 FCC Rcd 11805, 11807, para. 6 (2015); Lyca Tel,
LLC, Notice of Apparent Liability for Forfeiture, 26 FCC Rcd 12827, 12829, para. 6 (2011) (same), Forfeiture
Order, 30 FCC Rcd 11792, 11794, para. 6 (2015); Simple Network, Inc., Notice of Apparent Liability for Forfeiture,
26 FCC Rcd 16669, 16671, para. 6 (2011) (same), Forfeiture Order, 30 FCC Rcd 11765, 11767, para. 6 (2015);
Touch-Tel USA, LLC, Notice of Apparent Liability for Forfeiture, 26 FCC Rcd 12836, 12838, para. 6 (2011) (same),
Forfeiture Order, 30 FCC Rcd 11730, 11732, para. 6 (2015).
50 NAL, 27 FCC Rcd at 15571, para. 26.
51 A RespOrg is responsible for managing a toll-free subscriber’s record in the Service Management System
database which controls routing on all toll-free telephone numbers and coordinates with the subscriber’s toll-free
service providers. See 47 CFR § 52.101(b), (d).
52 Id. at 15561, 15572–73, paras. 3, 29–31.
53 Id. at 15565–67, paras. 13–16.
54 Id. at 15572–73, para 30. After the Commission began its investigation into the Company’s violations, but prior
to the issuance of the NAL, Hines transferred his membership interests to the Patrick Hines Revocable Trust (Hines
Trust). This ownership transfer from Hines to the Hines Trust was disclosed to the Commission during the
bankruptcy proceeding. See Burnett Apr. 25, 2012 Letter, supra note 11; see also In re Telseven, LLC, Case No.
3:12-bk-02582-PMG, U.S. Bankr. Ct., Mid. Dist. Fla., Corporate Ownership Statement (Rule 7007.1) (May 4, 2012)
(on file in EB-IHD-14-00014999) (disclosing the Patrick Hines Revocable Trust). Telseven, LLC, is owned by the
Hines Trust and it appears that Calling 10, LLC, through a number of intervening entities, is also owned by this
trust. Specifically, Calling 10, LLC, is owned by Red Resources, Ltd., a company located at Palm Grove House,
P.O. Box 438, Road Town, Tortola, British Virgin Islands, which is owned by Blue Consulting, which in turn is
owned by the Hines Trust as well. See NAL, 27 FCC at 15572–73, para. 30. See also Testimony of Patrick Hines,
Proceeding No. I1012010, Consumer Protection and Safety Division, California PUC at 260 (Nov. 16 and 17, 2011)
(continued….)
Federal Communications Commission FCC 16-21
8
filed with the State of Delaware provided that 100 percent of net cash from operations was to be paid out
for the benefit of its one member, Tarajara Properties—later Red Resources—which was owned 100
percent by Blue Consulting, which was owned by the Patrick Hines Revocable Trust.55 Hines established
a number of different entities that he would use and terminate at will in the furtherance of his
aforementioned cramming scheme, including Levendo, LLC (which entered into the contracts for billing
Calling 10, LLC, services and for the Calling 10 directory assistance service);56 RespOrgs,57 such as
Signal One (which secured the toll-free numbers on behalf of Calling 10); and Tarajara Properties, Red
Resources, and Blue Consulting (all apparent conduits to the Patrick Hines Revocable Trust).58
17. As Calling 10 developed legal problems—through the Commission’s and other law
enforcement investigations—Hines sold the assets of the companies59 and had the companies file for
bankruptcy. The Commission, in order to prevent Hines from defeating the purpose of Section 201(b),
must look beyond the Calling 10 corporate name and hold Hines personally liable for the unjust and
unreasonable practices he conducted, as discussed in the NAL.60
18. Hines argues we should not “pierce the corporate veil” to hold an individual owner of a
corporate entity liable for the entity’s violations, but rather that the test should only apply when two
corporate entities are involved. He asserts that the piercing the corporate veil test “makes no sense with
respect to an individual owner of a corporate entity”61 because all three of the factors would always apply
in the case of a small business, making the test meaningless.62 We disagree. Among other things, Hines’
argument ignores the objective of the third factor—the “necess[ity] to preserve the integrity of the
Communications Act and to prevent the entities from defeating the purpose and provisions of statutory
(Continued from previous page)
(Hines PUC Testimony); Hines PUC Testimony at 302, 430 (stating Calling 10 is owned by Red Resources, which
is owned by Blue Consulting, which is in turn owned by the Hines Trust); Hines Deposition at 26 (describing the
chain of corporations as “overly complicated, disregarded entities”). Hines also stated that, despite the chain of
corporations, he was paid directly by Calling 10. Hines Deposition at 26. In short, even after the transfer of control
to the Hines Trust, Hines retained sole control of Calling 10 as the trustee of the Hines Trust, which he managed for
his sole benefit as the beneficiary of the Hines Trust. See Testimony of Patrick Hines, Proceeding No. I1012010,
Consumer Protection and Safety Division, California PUC at 302, 431 (Nov. 16 and 17, 2011) (stating Hines is the
beneficiary of the trust). Moreover, neither the Company nor Hines has disputed that Hines is the sole beneficiary of
the Hines Trust. Importantly, Hines and the Company represented to the Commission without equivocation that he
was the sole owner of Telseven and controlled the Company. See International Section 214 Application of
Telseven, LLC, FCC File No. ITC-214-20040209-00047, Attachment 2, granted Dec. 1, 2005, DA 05-3129, Report
No. TEL-00970 (Hines identified as 100% owner of Telseven in Company’s FCC license application) (cited in NAL,
27 FCC Rcd at 15559 n.10).
55 NAL, 27 FCC Rcd at 15572–73, para. 30.
56 Calling 10 contracted with Wholesale Carrier Services, Inc. (WCS), to transport the calls to Calling 10’s ENADA
platform in Nevada. See Testimony of Rudy Sastra, Proceeding No. I1012010, Consumer Protection and Safety
Division, California PUC at 18 & n.38 (July 12, 2011). WCS and ILD Teleservices, Inc., provided the purported
directory assistance services. See Hines PUC Testimony at 260.
57 Three Calling 10 affiliates were the RespOrgs for Calling 10. See NAL, 27 FCC Rcd at 15558, para. 1 n.5.
58 Id. at 15572–73, para. 30.
59 Assist 123, LLC, whose officers include individuals who served as consultants to Calling 10, as well as one of
Hines’ relatives, obtained the Calling 10 toll-free numbers one year prior to the Calling 10 bankruptcy. See Assist
123, LLC, Order and Consent Decree, 29 FCC Rcd 8248 (2014).
60 NAL, 27 FCC Rcd at 15573, para. 31.
61 NAL Response at 1-3.
62 Id.
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provisions.”63 Indeed, the test captures individuals similarly situated to Hines because that is who the test
is designed to capture—egregious violators of the Act who create sham corporate forms to evade liability.
Accepting Hines’ assertion would create a blanket exemption from corporate veil-piercing for the very
inequity the doctrine is intended to address. We accordingly conclude that both the three factor test— and
our review of the equities—clearly urges piercing Calling 10’s corporate veil, and Hines has provided no
basis to disturb that conclusion.64
19. Moreover, the D.C. Circuit’s decision in Capital Telephone upheld the Commission’s
decision to pierce the corporate veil between an individual and his wholly owned corporation. In Capital
Telephone, the Commission pierced the corporate veil of the Capital Telephone Company, Inc. when both
it and its sole owner, Mr. Peter Bakal, sought licenses for the only two high band paging channels
available in a certain region of New York. Affirming the Commission, the D.C. Circuit stated “[t]he
Commission recognized [that] injustice … would be done to [a competing applicant] if both the Bakal and
Capital applications were granted. This would, in effect, grant to one individual the use of all the most
desirable available high-band paging channels in the … area ….”65 The court found that “substantial
evidence supports the Commission’s decision to pierce Capital’s corporate veil in order to carry out the
statutory mandate ‘to provide a fair, efficient, and equitable distribution of radio service.’”66 Here, the
Commission is acting to prevent reliance on corporate form to frustrate our efforts to implement core
statutory provisions.67 Contrary to Hines’ argument, we are not “eviscerat[ing] automatically” corporate
legal structures.68
20. Hines also argues that the Commission’s goal of promoting small businesses counsels
against piercing the corporate veil here.69 Hines cannot reasonably rely upon this goal where the small
business in question has been willfully and repeatedly “cramming” charges for its service on consumers’
local telephone bills
21. Hines also protests that, “in its almost 80 year history, the FCC has not applied the
‘pierce the corporate veil’ test described in the NAL to find an individual owner … separately liable for a
forfeiture against that entity.”70 As discussed above, the applicable standard permits us to pierce the veil
of a corporation to reach an individual owner who has acted to undermine the statute under which his
company is regulated. It does not, moreover, preclude us from finding that owner liable for a forfeiture
and we do so here based upon the clear record before us.
63 Contrary to Hines’ assertion, there are instances where violations would not rise to the level of frustrating the
purpose of the Act and thus implicate this test. See Lockheed Martin Corp., Order on Reconsideration, 17 FCC Rcd
13160, 13167, para. 18 (2002) (determining that the public interest would not be served by additional Commission
action against a licensee for a minor rule violation); David A. Davila, et al., Memorandum Opinion & Order, 6 FCC
Rcd 2897, 2899, para. 10 (1991) (late disclosure of a loan agreement is a minor rule violation that, without more,
does not raise a substantial and material question of fact with respect to licensee’s character qualifications).
However, egregious violations such as those committed by Hines undoubtedly qualify.
64 Capital Telephone, 498 F.2d at 737 (“The broad equitable standards of the statute, enacted to further public
convenience, clearly support the Commission’s decision to look beyond the corporate entity to serve the interests of
fairness, justice and equity.”) (emphasis added).
65 Capital Telephone, 498 F.2d at 736.
66 Id. at 739 (quoting 47 U.S.C. § 307(b)).
67 See 47 U.S.C. §§ 159, 251(e)(2), 254(d).
68 NAL Response at 3.
69 Id.
70 Id. at 2.
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22. Finally, Hines contends that because the Company is a Florida limited liability company,
the Commission should apply Florida corporate law to determine whether to pierce the corporate veil.71
We disagree. As an initial matter, the Commission is enforcing federal law, which Calling 10 and Hines
violated. Therefore, it is appropriate for the Commission to rely on federal common law, which clearly
supports the Commission’s decision to pierce the corporate veil.72 Even if we were to apply Florida law,
the outcome would not be altered, as it is appropriate to pierce the corporate veil under that state’s law if
“it [can] be shown that the corporation is formed or used for some illegal, fraudulent or other unjust
purpose,”73 which accurately describes Calling 10.74
23. Hines nonetheless contends that “the [NAL] is devoid of any allegations that Calling 10
was established or used for an improper, illegal or fraudulent purpose.”75 We disagree. The NAL details
how those entities were used to engage in unjust and unreasonable practices in violation of Section 201(b)
of the Act. Indeed, the first paragraph of the NAL states that the Commission finds that Hines and Calling
10 “have apparently willfully and repeatedly violated Section 201(b) of the Communications Act . . . by
deceptively marketing their . . . service and by ‘cramming’ charges for that service on consumers’ local
telephone bills without authorization.”76 This description is repeated throughout the NAL in describing
the relationship between Calling 10 and Hines.77 The NAL also describes the deceptive nature of the
marketing practices78 and emphasizes that such deceptive marketing and cramming were egregious.79
24. Hines failed to produce any evidence that a consumer authorized the charges he imposed
or obtained directory assistance from his company. As the sole corporate officer and manager, he had the
power to correct the fraudulent activities (if, as he contends, the fraud was the corporate activity, rather
than his own actions), particularly after consumers complained of the unauthorized charges. He failed to
do so, however, and instead continued the deceptive marketing and cramming scheme for many years. In
71 Id. at 4–5.
72 See Ivy Broad. Co. v. Am. Tel. & Tel. Co., 391 F.2d 486, 491 (2d Cir. 1968) (As a result of the Act’s
comprehensive regulatory scheme, “the duties, charges, and liabilities of telegraph or telephone companies with
respect to interstate communications service are to be governed solely by federal law,” and the states are precluded
from acting in this area.”); MCI Telecomms. Corp. v. O’Brien Mktg., Inc., 913. F. Supp. 1536, 1541 (federal
common law, rather than state law, applies to the issue of piercing the corporate veil in a proceeding interpreting the
Act). Hines’s reliance on Stromberg Metal Works v. Press Mech., Inc., 77 F.3d 928 (7th Cir. 1996) for his argument
that Florida law controls is unavailing. Hines inappropriately seeks to rely on a case subject to federal jurisdiction
only because of a diversity of citizenship, as opposed to cases such as Ivy Broad Co. and MCI Telecomms. Corp.,
which pertain to the enforcement of a valid federal statute. In Stromberg, the U.S. Court of Appeals for the Seventh
Circuit addressed the veil piercing matter as a subsidiary issue to resolving a choice of law question in a contractual
dispute. Only after deciding that Illinois law applied because of the controlling contract did the court apply that
state’s standard for piercing the corporate veil. See Stromberg, 77 F.3d at 933-34. And under Illinois law, the
corporate veil piercing law of a company’s state of incorporation is applied. See id. (citing Kern v. Chicago &
Eastern Illinois R.R., 6 Ill.App.3d 247, 250-51, 285 N.E.2d 501, 503-04 (1st Dist. 1972). The laws of the state of
incorporation do not always govern corporate veil piercing. See id.
73 Dania Jai-Alai Palace, Inc. v. Sykes, 450 So.2d 1114, 1121 (Fla. 1984) (quoting Robert’s Fish Farm v. Spencer,
153 So.2d 718, 721 (Fla. 1963)).
74 Other cases cited by Hines do not support his argument that the Commission erred in piercing the corporate veil
here and merely repeat the same finding quoted above. See, e.g., Ally v. Naim, 581 So.2d 961 (Fla. 3d DCA 1991);
Hilton Oil Transport, et al. v. Oil Transport Co., 659 So. 2d 1141 (Fla. 3d DCA 1995).
75 NAL Response at 5–6.
76 NAL, 27 FCC Rcd at 15558, para. 1.
77 See e.g., id. at 15564, para. 12.
78 Id. at 15567–69, paras. 17–21.
79 Id. at 15570, para. 24.
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an investigation such as this one, where the corporate enterprise was designed to carry out the fraudulent
activities of one person, the activities consisted of deceptive marketing and cramming violations of
Section 201(b) of the Act, and the corporation has since sold its assets and then filed for bankruptcy
protection, we find that the purpose of the statute would otherwise be frustrated if we permitted Patrick
Hines to hide behind his corporate entities and avoid personal liability for such statutory violations.80
25. Based on the record before us and in light of the applicable statutory factors, we find that
Calling 10 and Hines are jointly and severally liable for a total forfeiture of $1,680,000. As explained in
the NAL, this total results from applying a $40,000 forfeiture for each of the 14 cramming violations that
occurred within the 12 months prior to the release date of the NAL81 and applying an upward adjustment82
to the forfeiture in light of the scope and egregiousness of the violations.
IV. ORDERING CLAUSES
26. Accordingly, IT IS ORDERED that, pursuant to Section 503(b) of the Act,83 and Section
1.80 of the Commission’s rules,84 Telseven, LLC, Calling 10, LLC, and Patrick Hines, ARE JOINTLY
AND SEVERALLY LIABLE FOR A MONETARY FORFEITURE in the amount of one million six
hundred eighty thousand dollars ($1,680,000) for willfully and repeatedly violating Section 201(b) of the
Act.
80 The imposition of a forfeiture on Hines is also consistent with other cases in which the courts have held corporate
officers personally liable for participating in or authorizing an entity’s violations of law. See Texas v. Am. Blastfax,
164 F. Supp. 2d 892, 897–98 (W.D. Texas 2001) (“[I]f the officer directly participated in or authorized the statutory
violation, even though acting on behalf of the corporation, he may be personally liable [for violations of the
Telephone Consumer Protection Act]”); see also 47 U.S.C. § 153(39) (defining a “person” to include individuals as
well as corporate entities); United States v. Pollution Servs. of Oswego, Inc., 763 F.2d 133, 134–35 (2nd Cir. 1985)
(“In light of the clear congressional intent to hold ‘person[s]’ liable for violations [of the Rivers and Harbors
Appropriations Act], we see no reason to shield from civil liability those corporate officers who are personally
involved in or directly responsible for statutorily proscribed activity.”). See also. In other contexts, the courts have
found the responsible corporate officer of a company to be personally liable for unlawful acts where the corporate
officer was in a position of responsibility vis-à-vis the illegal conduct, had the power to prevent others from
engaging in such conduct or to promptly correct the violation, and failed to take action. See, e.g., United States v.
Hodges X-Ray, Inc., 759 F.2d 557, 560–62 (6th Cir. 1985).
81 See id. at 15570–71, para. 25. Section 503(b)(6) of the Act does not empower the Commission to impose a
forfeiture for violations that are the subject of an NAL and that occurred more than one year prior to the issuance of
an NAL. For that reason, the forfeiture proposed in the NAL was based on the 14 specific apparent “cramming”
violations referenced in the NAL Appendix that occurred within 12 months of the release date of the NAL. Older
complaints, however, are relevant to determining the amount of the forfeiture to impose for violations that occurred
within the last year, as these older violations establish the “extent and gravity of the violations” and the “history of
prior offenses” of Calling 10. See, e.g., Sandhill Communications, Notice of Apparent Liability, 25 FCC Rcd
17762, 17769, para. 15 n.45 (Enf. Bur. 2010) (noting that Section 503(b)(6) does not bar the Commission from
assessing whether a company’s conduct prior to the statute of limitations period violated the Act and Commission
rules and from considering such conduct in determining the appropriate forfeiture amount for violations that
occurred within the one-year statutory period).
82 The upward adjustment is the equivalent of an additional $80,000 per violation. We are assessing an upward
adjustment in light of the deceptive marketing practices; however, we could have found a separate violation of
Section 201(b) for each instance of deceptive marketing. Here, we are not imposing penalties for the additional
violations, but we consider them to be aggravating factors that also warrant upward adjustments of our base
forfeiture amounts. See, e.g., Tim Gibbons, Notice of Apparent Liability for Forfeiture, 27 FCC Rcd 11432, 11438,
para. 14 (2012).
83 47 U.S.C. § 503(b).
84 47 CFR § 1.80.
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27. Payment of the forfeiture shall be made in the manner provided for in Section 1.80 of the
Commission’s rules within thirty (30) calendar days after the release of this Forfeiture Order.85 If the
forfeiture is not paid within the period specified, the case may be referred to the U.S. Department of
Justice for enforcement of the forfeiture pursuant to Section 504(a) of the Act.86
28. Payment of the forfeiture must be made by check or similar instrument, wire transfer, or
credit card, and must include the NAL/Account Number and FRN referenced above. Telseven LLC,
Calling 10, LLC, and Patrick Hines shall send electronic notification of payment to Johnny Drake at
johnny.drake@fcc.gov on the date said payment is made. Regardless of the form of payment, a
completed FCC Form 159 (Remittance Advice) must be submitted.87 When completing the Form 159,
enter the Account Number in block number 23A (call sign/other ID) and enter the letters “FORF” in
block number 24A (payment type code). Below are additional instructions that should be followed based
on the form of payment selected:
· Payment by check or money order must be made payable to the order of the Federal
Communications Commission. Such payments (along with completed Form 159) must be
mailed to the Federal Communications Commission, P.O. Box 979088, St. Louis, MO
63197-9000, or sent via overnight mail to U.S. Bank–Government Lockbox #979088,
SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO 63101.
· Payment by wire transfer must be made to ABA Number 021030004, receiving bank
TREAS/NYC, and Account Number 27000001. To complete the wire transfer and ensure
appropriate crediting of the wired funds, a completed Form 159 must be faxed to U.S. Bank
at (314) 418-4232 on the same business day the wire transfer is initiated.
· Payment by credit card must be made by providing the required credit card information on
FCC From 159 and signing and dating the Form 159 to authorize the credit card payment.
The completed Form 159 must then be mailed to Federal Communications Commission,
P.O. Box 979088, St. Louis, MO 63197-9000, or sent via overnight mail to U.S. Bank–
Government Lockbox #979088, SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO
63101.
29. Any request for making full payment over time under an installment plan should be sent
to: Chief Financial Officer–Financial Operations, Federal Communications Commission, 445 12th Street,
SW, Room 1-A625, Washington, DC 20554.88 Questions regarding payment procedures should be
directed to the Financial Operations Group Help Desk by telephone, 1-877-480-3201, or by e-mail,
ARINQUIRIES@fcc.gov.
85 Id.
86 47 U.S.C. § 504(a).
87 An FCC Form 159 and detailed instructions for completing the form may be obtained at
http://www.fcc.gov/Forms/Form159/159.pdf.
88 See 47 CFR § 1.1914.
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30. IT IS FURTHER ORDERED that a copy of this Forfeiture Order shall be sent by first
class mail and certified mail, return receipt requested, to Christopher J. Greene, attorney for Patrick
Hines, at Purcell, Flanagan, Hay and Greene, 1548 Lancaster Terrace, Jacksonville, FL 32204.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary